SALES FORCE AUTOMATION USE AND SALESPERSON PERFORMANCE

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SALES FORCE AUTOMATION USE AND

SALESPERSON PERFORMANCE

by

MURAT SERDAROGLU

DISSERTATION

submitted to the Faculty of Business Administration and

Economics of

University of Paderborn

in partial fulfillment of the requirements

for the degree of

Ph.D. of Management (Dr. rer. pol.)

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Sales Force Automation Use and

Salesperson Performance

Murat Serdaroglu

Abstract

Understanding how technology investments create business value is a research priority in today's technology-intensive world. Drawing on a literature review as well as a qualitative study in the pharmaceutical industry, this research suggests that sales technology can support both: externally focused tasks towards managing customer relationships and internal administrative tasks. Building on this distinction, our quantitative analysis reveals that sales technology impacts salesperson performance directly when used as a customer relationship tool. In contrast, it has a perfectly mediated impact when used for internal coordination purposes. To unleash its real potential, sales technology should be designed to enable customer relationships rather than being perceived as a cost cutting tool. In addition, the motivational structure for using sales technology differs between two SFA-use dimensions. While the customer relationship dimension is driven by factors that trigger voluntary usage, the internal coordination dimension is predominantly explained by factors imposed from outside. Management should not impose technology usage. Rather, they should support self-initiating factors that stimulate technology usage for improving customer relationships. Combining upstream research focusing on the drivers of SFA-usage with downstream research shedding light on its performance impact, the study offers important implications for maximizing the pay-back from SFA-technology investments.

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Sales Force Automation Einsatz und

Außendienstmitarbeiter Leistung

Murat Serdaroglu

Zusammenfassung

In der heutigen Technologie-intensiver Wirtschaft ist es wichtig zu verstehen, wie Informationstechnologie Unternehmenswert schafft. In einem ersten Schritt unserer Forschung wurden eine Literaturrecherche sowie eine qualitativen Studie in der pharmazeutischen Industrie durchgeführt. Diese zeigen, dass Vertrieb orientierte Informationstechnologie (Sales Force Automation, SFA) sowohl nach außen fokussierte Aufgaben zum Management von Kundenbeziehungen als auch interne administrativen Aufgaben unterstützen kann. In einem zweiten Schritt wurde eine quantitative Studie, basierend auf diese Unterscheidung zwischen zwei Dimensionen, durchgeführt. Diese bestätigt, dass SFA Technologie die Außendienstmitarbeiterleistung direkt beeinflussen kann, wenn es als Customer-Relationship-Tool verwendet wird. Im Gegensatz hat SFA nur eine voll vermittelte Auswirkung, wenn es für interne Koordination und Verwaltung verwendet wird. SFA soll als Kundenbeziehungsmanagement Tool wahrgenommen werden, um sein eigentliches Potential zu enthüllen. Darüber hinaus wird die „Customer-Relationship“ Dimension von innerlichen Faktoren beeinflusst, die die freiwillige Akzeptanz auslösen. Die zweite Dimension, „Internal Coordination“, wird eher durch externe Faktoren bestimmt. Unsere Studie kombiniert die Einflussfaktoren des SFA-Einsatzes mit den Folgen solcher Anwendung und bietet dadurch signifikante Implikationen für die Maximierung der Rentabilität von SFA-Technologie-Investitionen.

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Acknowledgements

This dissertation is the result of a research effort that started just about four years ago. In this part, I would like to take the opportunity to thank to those people who have contributed to its development and refinement in one way or another.

First of all, I would like to express my greatest appreciation to my advisor, Prof. Dr. Andreas Eggert, for his continuous support, encouragement, and valuable ideas during the entire research process. His remarks and suggestions were always stimulating and constructive. His mentorship has equally great influence on my thesis and on my future research career. Thank you again, Andreas.

Secondly, I am very grateful and honored for having Prof. Dr. Bettina Schiller, Prof. Dr. Hartmut Holzmüller, Prof. Dr. Klaus Rosenthal and Prof. Dr. Bernd Frick in the dissertation committee. Their valuable comments and questions on my dissertation have provided me a deeper insight into my research work.

Furthermore, I greatly appreciate my mentor Nils at the company sponsoring my research. He believed in me with enthusiasm and stayed behind me since the beginning of our work. Our constructive discussions have been an inexhaustible source of inspiration for me. It was my great opportunity to work together with you. I am also greatly indebted to the head of marketing department François for his financial support and recognition. I value Christine equally for her great mentoring at later stages of the study.

Also, I would like to thank to the head of sales department in Brazil for permitting me to collect data in Brazil. My special thanks here are for Antonio, who supervised the pilot and actual data collection in Brazil. I thank also to the heads of sales departments in Germany, Belgium, Austria, India and the U.K. for their remarks and suggestions which helped me shape

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Moreover, I am most grateful to Prof. Dr. Gary Hunter from Illinois State University for providing me with detailed comments and suggestions aimed at improving the quality of our study. In addition, I wish to express my sincere thanks to the members of the marketing chair, Dr. Ina Garnefeld, Franziska Weis, Sabine Hollmann, Eva Münkhoff and Lena Steinhoff. With their continuous support I never felt as an external Ph.D. candidate.

Last but not least, I am indebted to Maria Leonor Alvarenga, a best friend who has also double-checked the translation of our questionnaire into Portuguese.

Finally, I thank my Mother, my Father and my Brother for making me who I am. Without you I could never come so far. Thank you.

Murat Serdaroglu

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5.4.2. Perceived Usefulness ... 107 5.4.3. Perceived Ease-of-Use ... 109 5.4.4. Supervisor Support ... 110 5.4.5. Facilitating Conditions ... 113 5.4.6. Computer Self-Efficacy ... 114 5.4.7. Team-Use ... 115 5.4.8. Supervisor SFA-Control ... 117 5.5. Control Variables ... 119 5.6. Logical Structure ... 121 6. EMPIRICAL STUDY ... 123

6.2. Empirical Design ... 123

6.2.1. Non-Experimental Design ... 123

6.2.2. Cross-Sectional Design ... 126

6.2.3. Data Collection Method ... 127

6.3. Sampling ... 129

6.4. Data Collection... 133

6.4.1. Questionnaire ... 133

6.4.2. Data Collection... 136

6.4.3. Describing the Sample ... 139

6.5. Item Generation and Testing ... 139

6.5.1. Reflective Constructs ... 142

6.5.2. Formative Constructs ... 152

7. DATA ANALYSIS ... 162

7.2. Data Analysis Method ... 163

7.3. Data Examination ... 167

7.3.1. Acceptable Sample Size: Power Analysis ... 167

7.3.2. Handling Missing Data ... 168

7.4. Measurement Model Evaluation ... 169

7.4.1. Constructs with Reflective Items ... 169

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7.5. Structural Model Evaluation ... 173

7.5.1. Results of the Structural Model... 174

7.5.2. Evaluation of a Rival Model ... 179

8. DISCUSSION ... 182

8.2. Implications for Theory... 183

8.3. Implications for Management ... 194

8.4. Limitations and Suggestions for Future Research ... 203

8.5. Conclusion ... 205

APPENDIX ... 207

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LIST OF FIGURES

Figure 3.1: A Process Oriented Model of IT Business Value ... 57

Figure 3.2: The Value Chain ... 59

Figure 3.3: Typology of Business Processes ... 61

Figure 3.4: Dimensions of IT-Business Value ... 62

Figure 5.1: System-to-Value Chain ... 94

Figure 5.2: Updated DeLone and McLean IS Success Model ... 94

Figure 5.3: Research Model ... 96

Figure 5.4: Technology Acceptance Model ... 105

Figure 6.1: Questionnaire Layout ... 135

Figure 6.5: Theoretical and Observable Levels in Empirical Research .... 140

Figure 6.6: Principle Factor Model ... 142

Figure 6.7: Composite Latent Variable Model ... 153

Figure 7.1: Structural Model Results ... 175

Figure 7.2: Illustration of the Mediating Effect ... 178

Figure 6.2: Descriptive Statistics: Sales Experience ... 207

Figure 6.3: Descriptive Statistics: Age ... 208

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LIST OF TABLES

Table 6.1: Reflective Construct Definitions ... 145

Table 6.2: Sources of Reflective Measurement Items ... 147

Table 6.3_:_{Decision rules for determining whether a construct should be} formative or reflective ... 154 Table 6.4_:_{Formative Construct Definitions ... 157}

Table 6.5_:_{List of Formative Items ... 159}

Table 6.6_:_{Item Validity and Reliability Based on Pilot Data ... 210}

Table 6.7_:_{List of Reflective Items ... 212}

Table 7.1: Descriptive Analysis of Reflective Items ... 214

Table 7.2: Exploratory Factor Analysis ... 216

Table 7.3: Exploratory Factor Analysis without Facilitating Conditions.. 217

Table 7.4: Reflective Items Validity and Reliability... 218

Table 7.5: Discriminant Validity (AVE Analysis) ... 220

Table 7.6: Cross Loadings ... 221

Table 7.7: Descriptive Analysis of Formative Items ... 222

Table 7.8: Multicollinearity Analysis and Item Weights ... 223

Table 7.9: Hypothesis Testing Results ... 224

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Chapter 1: Introduction

1.

INTRODUCTION

Sales forces are caught in the middle. On the one side, their customers have changed dramatically in terms of how they purchase and what they expect. On the other side, their own corporations have shifted, going through downsizing, restructuring, and cost cutting. Traditional boundaries such as those between sales and marketing have crumbled. Salespeople have to cope with more products, introduced faster with shorter life cycles, and less competitive differentiation. (Rackham and De Vincentis 1999, p. ix)

Sales forces today face many challenges originating from both outside and inside of their organizations (Jones, Brown, Zoltners, and Weitz 2005). As the biggest external actor, customers constantly raise their expectations. Through the Internet they inform themselves about product alternatives before making a purchase. They expect from salespeople to be equally well informed about the best solution possibilities and the latest market trends. Recent advances in communication technologies give the capacity to communicate quickly and effectively, making customers demand quick response and accessibility from the salesperson side. Buying procedures are becoming complex and require salespeople to deal with greater networks within client organizations. Furthermore, customers are increasingly opting for customized solutions which place additional burden on salespeople in terms of information gathering, communication and coordination within both buyer and seller organizations (Zoltners et al. 2001).

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In addition to rising customer expectations, intense competition places great pressure on salespeople by squeezing the profit margins. Globalization brings down the borders and makes market entry easier for competitors. Companies and sales forces have to deal with a reduced amount of differentiation from competition and increased product complexity. As product life cycles shorten, salespeople must more frequently update their product knowledge. It gets increasingly difficult to access profitable customers, and companies need to develop better ways of allocating their resources to the right customer segments (Reinartz and Kumar 2000).

Emerging ethical and legal environment also constrains sales organizations’ ability to freely pursue certain selling activities. Companies are introducing codes of conduct which set strict standards that must be upheld when encountering clients. Salespeople are increasingly asked to document their activities and be accountable for their actions such as managing expense accounts, giving gifts, making promises about product performance and delivery, and selling products that can be perceived as ‘unnecessary.’ In industries such as pharmaceuticals and medical equipment, salespeople have to keep a record of the samples and other material they distribute to their clients.

Companies respond to challenges in their markets with various strategic, organizational and operational measures which bring additional burden on salespeople. They move the strategic direction of their sales forces away from a transaction focus to a relationship focus (Ingram 1996; Weitz and Bradford 1999). In this setting, salespeople are expected to shift their time from order taking to creating customized solutions for their customers and seeking new business (Shoemaker 2001). Besides, companies adopt new selling models and organization structures such as team selling and key account management (Jones, Dixon, Chonko, and Cannon 2005). This

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development makes sales, marketing and other functions merge gradually to better identify customer needs and offer solutions addressing those needs (Rouzies et al. 2005). Last but not least, innovative sales channels are being introduced such as Internet and call-centers (Stone et al. 2002). In this overall framework, salespeople are required to act like an orchestrator to manage the value-generating network by communicating in real time with their companies and coordinating their activities with their team members, chain partners and clients.

With the anticipation to meet these challenges and improve sales force effectiveness, companies continue investing in information technologies (IT) (Shoemaker 2001; Parthasarathy and Sohi 1997). Sales specific IT, which is often called Sales Force Automation (SFA),1 enables salespeople to store, retrieve, and analyze customer data and manage important information throughout the sales cycle (Morgan and Inks 2001). However, it has not been straightforward for companies to realize this potential so far. Lack of SFA adoption and vanishing person-job fit may be the outcomes of an ambitious SFA project (Speier and Venkatesh 2002). One typical reason of failure is shown to be the lack of measuring the impact of sales technologies on sales force (Erffmeyer and Johnson 2001). The impact of SFA technology on salesperson performance and organizational profitability has been largely neglected in literature.2

It is crucial for firms investing in SFA technology to understand how IT contributes to sales effectiveness. In the end, firms cannot keep investing in a technology without knowing its return on investment. Our research objective is to understand how SFA impacts salesperson performance. We propose that not every salesperson benefits from SFA in the same way. How

1

Refer to Chapter 2 for a detailed definition of the Sales Force Automation technology.

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salespeople use SFA should be determining the extent to which they benefit from this technology. We further argue that salespeople have different motivations when using SFA. We expect to offer substantial insights on how SFA-use impacts salesperson performance and the factors drive that usage, which in turn should help firms maximizing their return on SFA-technology investments.

In this chapter we present our motivation for a research in sales technology field. We first discuss the importance of SFA technology for businesses and identify the gaps in relevant literature (section 1.1). Following that, we define our research problem and formulize research questions based on the identified gaps (section 1.2). After introducing our research questions, we elaborate on the potential contributions of our study for both theory and practice (section 1.3). We present the structure of our thesis in the last section (section 1.4).

1.1.

Research Justification

1.1.1.

Importance of SFA Research for Businesses

SFA technology represents a significant research field with important implications for businesses. This is mostly because, although SFA promises great benefits to companies, it is often not easy to realize and quantify these benefits. In this section we will be discussing the benefits, costs and risks of investing in SFA technology.

Despite the emergence of new direct channels such as the Internet and call-centers, sales forces still occupy an important position in linking companies

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to their customers today. This is mainly the result of an increased emphasis on developing and maintaining strong customer relationships (Cannon and Perreault 1999; Ingram 1996). Salespeople still carry the primary responsibility of building, and maintaining relationships with customers (Homburg and Stock 2004). They are a strong enabler of market orientation (Brown and Peterson 1993) and market intelligence (Pass et al. 2004; Le Bon and Merunka 2006). Salespeople have a strong influence in reducing customer defection (Johnson et al. 2001). As a result, the strategic importance of the sales force to organization success is at an all-time high. For businesses and researchers alike, understanding the efficiency and effectiveness of sales force should be a high research priority.

SFA can improve sales force effectiveness by freeing salespeople from costly administrative activities in favor of relationship building tasks, which better suit the skills and abilities of the sales force (Ingram et al. 2002). SFA can enhance communication and increase the overall quality of the sales effort through faster access to relevant and timely information (Jelinek et al. 2006). SFA carries significant potential for sales management and salesperson effectiveness which cannot be ignored by sales organizations. Therefore, it represents a phenomenon deserving strong research attention.

Consistent with the big potential promised by customer relating technologies, the Customer Relationship Management (CRM) market should continue to grow significantly, reaching $18 billion worldwide in 2010, according to a market report from AMR Research (Beal 2006).3 Strong competition and shareholder pressure for increased profitability force

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Most CRM solutions stem from SFA functionality and often represent customer relationship technologies serving organizational functions other than sales, such as marketing and service. The terms CRM and SFA are used often interchangeably in literature although they stand for different concepts. We use the term SFA to ensure consistency throughout the text. More on the association between CRM and SFA is

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companies to spend more on their CRM investments, increasing also the demand for sales force specific SFA solutions (Buttle et al. 2006). On the supply side, information technology vendors invest in improving the ability of their SFA solutions to integrate with back-office applications, add mobile capability, develop attractive licensing solutions and tailor them to meet the needs of particular industry verticals. SFA is a significant research topic as the investment for SFA systems gets bigger shares in corporate budgets.

However, SFA is an expensive investment. A typical SFA system costs from $5000 to $15000 per salesperson (Erffmeyer and Johnson 2001). The implementation of a classic CRM solution may last up to 24 months (Rigby et al. 2002).4 Moreover, SFA technologies consist of computer-based equipment, which become rapidly obsolete. Hence, there is a substantial continuous expense if the SFA system is to be kept up to date over the years (Parthasarathy and Sohi 1997). The decision to automate the sales force is made even more difficult because in the short run it is difficult to measure most of its benefits in dollar terms and to quantify the gain that can be enjoyed by the adoption of such a system.

What’s more, implementing SFA has turned out to be a difficult task and a painful experience for many companies. Despite its intuitive appeal and continual advancements in technology, SFA initiatives regularly fall short of expectations (Bush et al. 2005). SFA projects suffer failures at high rates; estimates predict 55 percent to 80 percent of initial efforts to end up with either losses or no improvement in company performance (Morgan and Inks

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CRM software is nowadays available in two ways. It can be installed on a client’s own servers (on-premise) or it can be accessed on a provider’s servers via the Internet in a manner much similar to an ordinary website (on-demand) (Buttle 2006). The former is often preferred by many large-scale enterprises and the costly option. The alternative on-demand deployments, in contrast, require much less investment at the beginning (due to the low set-up costs and shorter implementation times) and are suitable for

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2001; Reinartz et al. 2004; Rivers and Dart 1999). In a recent survey of business executives, only less than 50 percent of the respondents appeared to be satisfied with the business value delivered by their CRM and SFA systems (Beal 2008). SFA deployment is a difficult and complex task which should be taken seriously. It is important to understand why some organizations are successful at implementing SFA and why others are not.

To sum up, sales force effectiveness represents a significant opportunity for organizations and is high in corporate agendas. SFA is promising substantial benefits for sales force and companies are heavily investing in this technology. However, SFA is expensive and it is often difficult to quantify this technology’s benefits, making it in the end difficult to justify the investment made in SFA. Therefore SFA and its impact on sales effectiveness represent a significant research field.

1.1.2.

Literature Review

Major investments have been made in SFA to enhance the effectiveness and efficiency of sales personnel, even though it is expensive, difficult to manage and fast changing. In the light of the potential and risks simultaneously inherent in sales technology, interest in CRM and SFA is gaining momentum among academicians.5 Conflicting reports on the success rates of SFA implementations have initiated strong calls for additional research in this domain.6 For that reason, considerable amount of conceptual and empirical studies about SFA is coming out in the last years.

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Ahearne et al. 2008; Boulding et al. 2005; Jayachandran et al., 2005; Payne and Frow 2005, 2006; Rigby and Ledingham 2004; Srivastava et al. 1999; Thakur et al. 2006

6

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As intended outcomes of an IT system can be realized only through system-use, IT-adoption is suggested to be a key link between IT investment and performance (Dixon 2000; Devaraj and Kohli 2003). As a matter of fact, a given technology cannot deliver any benefit if end-users do not use it. Researchers therefore argue that low adoption of installed systems is a major reason of the missing returns on organizational investments in IT (Venkatesh and Davis 2000). Besides, salespeople have been among the most technophobic employee groups in organizations (Greenberg 2004). One of the major risks of introducing IT to a sales force is that individual salespeople resist using the technology (Parthasarathy and Sohi 1997). Early empirical work and anecdotal evidence also support the argument that the failure of SFA initiatives is, in part, being prompted by limited user acceptance of the implemented technology (Speier and Venkatesh 2002).

Consequently, issues associated with the underutilization of technology in the sales force is a research priority (Jones et al. 2002). Most of the early research on SFA has been either about explaining the adoption and diffusion of SFA7 or retrospectively examined salesperson failure to adopt technology and the consequences for organizational commitment, job satisfaction, and fit.8 While this research stream has explained a great deal of salesperson intention to adopt SFA and actual adoption of SFA, it has fallen short of explaining the consequences of that SFA adoption. In both practice and research, the lack of SFA adoption among salespeople has usually been equated with SFA project failure (Honeycutt et al. 2005). Motivating use has often been assumed to be the only critical issue for SFA implementation success (Hunter and Perreault 2007). Ahearne and his colleagues (2004) reveal this assumption clearly:

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Some studies which investigate the antecedents of SFA adoption and use: Jones et al. 2002; Morgan and Inks 2001; Robinson et al. 2005a; Schillewaert et al. 2005

8

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Each model [to explain technology acceptance] has the same dependent variable, usage, but uses various antecedents to understand acceptance of technology. An implicit assumption in all these models is a positive and linear relationship between performance and usage. There is an underlying assumption that technology utilization is a proxy of its perceived effectiveness. (p. 297)

However, SFA adoption among salespeople does not automatically translate into better sales performance (Landry et al. 2005). Ahearne and others (2004) empirically disprove the positive and linear assumption of SFA use and performance link and demonstrated a curvilinear relationship between sales performance and technology use, which hints for the negative effect of SFA over-use. SFA use may also result in negative perceptions among salespeople such as role conflict and ambiguity (Rangarajan et al. 2005). It is not plausible to assume that SFA adoption by itself will bring increased salesperson effectiveness. End-user adoption alone should not be the ultimate objective of any SFA effort.

In fact, SFA is gathering interest in academic research as a fundamental business process with significant impact on organizational results (Srivastava et al. 1999). Researchers are increasingly calling for additional research in the area of technology use and its realized impact on salesperson performance (Good and Stone 2000; Jones et al. 2002; Leigh and Marshall 2001; Marshall et al. 1999; Marshall and Michaels 2001; Raman et al. 2006). The call for additional research on the impact of SFA usage on salesperson performance is well warranted. As Ahearne and others (2005) argue, what should really matter in an SFA project is the technology’s actual contribution to salesperson efficiency, effectiveness, or both:

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Technology adoption is only important if it truly leads to performance improvements. (…) The proper criteria by which to judge if an SFA initiative has been successful rest not simply in determining whether or not salespeople adopt technology, but whether or not adoption (i.e. use) actually improves performance. (p. 380)

There are actually a number of studies in the literature which investigate the relationship between technology usage and sales performance.9 Using multi-source empirical data, Ko and Dennis (2004) show that salespeople with higher expertise benefit more from an SFA system. Jelinek and others (2006) demonstrate in a longitudinal setting that SFA-adoption increases salesperson performance. In another study, no frequency of use but infusion (i.e., the degree to which the person maximizes the potential of the technology) explains salesperson performance (Sundaram et al. 2007). On the other hand, Rivers and Dart (1999) can report no apparent relationship between the extent of SFA acquisition and the benefits generated. Similarly, Avlonitis and Panagopoulos (2005) cannot empirically validate a significant relationship between SFA acceptance and salesperson performance.

Many of these studies theorize a direct link from SFA adoption to salesperson performance and do not investigate the facilitating mechanisms through which this link occurs. SFA research, in general, has focused on people and technology issues and mostly neglected the business processes (Buttle et al. 2006). Uncovering the processes through which technology influences sales force performance should be a research priority (Avlonitis

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Refer to Collins and Schibrowsky 1990; Moriarty and Swartz 1989; Wedell and Hempeck 1987; and Zablah et al. 2004 for early conceptual studies on SFA and performance relationship, and Keillor et al. 1997 and Moncrief et al. 1991 for

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and Panagopoulos 2005). Mithas and others (2005) conclude in their paper that additional research is necessary to consider how SFA technology is used by employees to improve business processes:

CRM applications merely enable firms to collect customer knowledge. Only when firms act on customer knowledge by modifying service delivery or by introducing new services will they truly benefit from their CRM applications. There is a need for further research to trace the causal chain linking CRM applications and customer satisfaction at a finer level of granularity by specifically accounting for such complementary actions. (p. 207)

Such a granular view of the relationship between SFA-adoption and performance may be established by incorporating SFA-specific salesperson behavior into research models. There are certainly different ways to use an information technology tool and the way SFA is used should have a decisive impact on customer satisfaction and the bottom line (Hunter and Perreault 2007). In fact, while some salespeople benefit from the SFA technology, others do not (Ahearne et al. 2005). However, the differences between salespeople in terms of their SFA-use behavior are often overlooked in the literature, where the analysis is limited to answer the question if the salesperson uses SFA or not. Research in outcomes of sales technology use needs to examine the circumstances under which such use leads to higher levels of salesperson effectiveness, efficiency, and customer satisfaction (Tanner et al. 2005; Parthasarathy and Sohi 1997).

Even when the link between the right way of using SFA and sales performance were completely illuminated, present research could not

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answer the question of what motivates salespeople to use SFA technology in that right way. While there are studies successfully explaining the drivers of increased SFA-adoption and use (Schillewaert et al. 2005), to best of our knowledge, there is no study which examines the impact of such driver factors on a specific direction of SFA-related behavior. In one relevant study, Ahearne and others (2005) report that the salespeople who received adequate training also benefited more from SFA technology. In their literature synthesis on performance impacts of IT, Soh and Markus (1995) draw attention to ‘appropriate’ use of IT and call for additional research to study “what constitutes appropriate use, how organizations promote appropriate use, and how appropriate use translates into IT impacts” (p. 39).

1.2.

Research Problem and Research Questions

The literature has developed a rich understanding of SFA technology and its use in the workplace. Both organizational and individual drivers of SFA adoption have been widely tested so far and it has been made clear that the performance impacts of SFA technology must be the focus of future research. In contrast, empirical analysis is mostly limited to modeling salesperson performance as a simple linear function of SFA-use. Such a conceptualization of the relationship between SFA-use and salesperson performance restricts the value of the theory for both researchers and practitioners. Researchers lack empirical evidence to evaluate competing theoretical models. Practitioners lack guidelines to decide on the appropriate form and extent of SFA-use under different sets of conditions.

Our research objective is to build upon existing literature by understanding how SFA technology relates to salesperson performance. Specifically, we

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want to demonstrate empirically that how salespeople use SFA to accomplish their daily tasks, and not only if they are using SFA or not, has a direct impact on their performance. We further aim to show that salespeople have different motivations when using SFA technology and different antecedent factors drive certain SFA-use behavior. Based on the theoretical foundations of resource based view of IT business value (Melville et al. 2004) and process-oriented models of IT business value (Barua et al. 1995), we develop and empirically test a conceptual model to investigate the following research problem:

The mechanism through which Sales Force Automation technology affects salesperson performance has not been fully clarified in the literature yet. Above all, further research is necessary to explain how particular SFA-use behavior10 impacts salesperson performance. Furthermore, we do not know

yet for which reasons a salesperson uses SFA in that particular way.

10

We define SFA-use as the application of sales technology by a salesperson to support sales job relevant tasks and processes. We define ‘particular SFA-use behavior’ as the specific behavior which distinguishes a salesperson from others in terms of using SFA

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This research problem is subdivided into the following research questions:

(1)How should the SFA-use construct be conceptualized to better incorporate the particular SFA-use behavior of a salesperson?

In order to further illuminate the functioning mechanism of SFA when affecting salesperson performance, a granular view of SFA-use is necessary. In this way it will be possible to better distinguish salespeople in terms of their SFA-use and identify the cases where SFA-use makes a positive contribution. Therefore, our first objective is to conceptualize an SFA-use construct which will enable to better incorporate the particular SFA-use behavior of a salesperson.

(2)Does the way SFA is used by salespeople impact their performance?

Our second research objective is to test how SFA-use impacts salesperson performance. We will link our SFA-use construct to salesperson performance in a conceptual model and empirically test their relationship to see how a particular SFA-use behavior affects sales performance.

(3)Which antecedent factors will explain those particular ways SFA is used by the salespeople?

Organizational and individual antecedents of SFA-adoption which already exist in literature should be tested again for their effects on differentiated SFA-use behavior. Our third research objective is to test a number of well established antecedents of SFA-adoption to see how they drive SFA-use in a certain behavioral direction.

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1.3.

Intended Contributions

We expect our study to provide practical guidance to sales and marketing practitioners on critical areas such as key sales processes supported by IT, type and quality of IT assets, specification of appropriate SFA-use, and its outcomes. The intended contributions of our research are threefold:

First, we argue that SFA-use should be conceptualized as a task-based construct. Tapping the job-related tasks achieved by employing the system along organizationally relevant dimensions (Doll and Torkzadeh 1998), we can better distinguish salespeople in terms of their SFA-use behavior.

Then, we insert our SFA-use construct into an operational selling context by linking it to its antecedent variables and salesperson performance. By the granular sight provided by our task-based SFA-use construct, we can shed more light on the process through which SFA impacts the bottom line. Therefore, our second contribution lies in better explaining the relationship between SFA-use behavior and salesperson performance.

Our third contribution derives from the antecedents driving our SFA-use construct. By applying well established antecedents of SFA-adoption to explain our SFA-use construct, we can make more precise recommendations to practitioners in order to stimulate SFA-use in the desired manner.

In sum, our research approach can offer substantial insights on how SFA-use impacts salesperson performance and which factors drive that way of usage, which in turn helps firms maximizing their return on SFA-technology investments.

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1.4.

Thesis Structure

In this thesis, we first define SFA technology and present its benefits and implications for sales management and businesses in general (chapter 2). Next, we devote a chapter for the theoretical underpinnings of how information technology creates business value (chapter 3). Following that, we argue the necessity of a task-based multidimensional measure of SFA-use to understand sales technology’s impact on salesperson performance (chapter 4). Against the background of a literature review and a qualitative study, we further conceptualize task-based dimensions of SFA-use. This section is then followed by our conceptual model and hypotheses (chapter 5). After, we present our empirical design decisions and data analysis methodology and results (chapters 6 and 7). We conclude the thesis with a discussion of our results, limitations and suggestions for future research (chapter 8).

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Chapter 2: Sales Force Automation and Sales Management

2.

SALES FORCE AUTOMATION AND SALES

MANAGEMENT

2.1.

Introduction to the Chapter

The introduction of Information Technology (IT) to the sales profession has many implications for how salespeople and sales managers do their jobs. The objective of this chapter is to draw an overall framework for IT deployment in sales environment and to provide insight regarding the capabilities of the technology and the potential impact of such applications on organizations. In the first section of the chapter a definition of Sales Force Automation (SFA) technology is given. This will be followed by a brief discussion of Customer Relationship Management and its association with SFA. Finally, potential benefits of SFA sought by sales management are presented. In the second part, we discuss the implications these technologies have for sales profession and the salesperson.

2.2.

Defining Sales Technology

2.2.1.

Sales Force Automation

SFA can essentially be described as the application of information technology to support salespeople in their selling and/or administrative activities (Morgan and Inks 2001). SFA systems utilize computerized hardware, software, and telecommunications technology to capture, access, analyze, and exchange high quality information in order to improve sales

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force productivity and effectiveness (Jayachandran et al. 2005).11 This information generally includes transactional and profiling data about customers, market data, competitor profiles, product libraries, pricing schedules and other information (Buttle et al. 2006). Such rich information can support salespeople when developing long-term mutually beneficial relationships with customers.

However, there has been no clear and widely accepted definition of SFA (Rivers and Dart 1999). SFA means different things to different people and to different firms (Erffmeyer and Johnson 2001). The exact nature of SFA varies dramatically from one firm to the next (Morgan and Inks 2001), as “each firm is unique, as are its customers, markets, business objectives, resources, and perhaps most important, the stakeholders who will be germane to its specific CRM circumstances” (Plouffe et al. 2004, p. 324). Some researchers and firms prefer narrow conceptualizations of SFA. Schillewaert and others (2005) do not include general office tools (e.g. word processing and presentation) or separate e-mail and Internet applications into their SFA definition. Parthasarathy and Sohi (1997) define SFA systems consisting of centralized database systems that can be accessed through a modem by remote laptop computers. Ko and Dennis (2004) define SFA as hardware and software applications to provide knowledge that enhances learning and improves performance. Other authors who make broader conceptualizations of SFA also include information technology that salespeople use to perform their roles such as mobile phones, e-mail, word-processors and web browsers in their definitions and not just the dedicated software offered by SFA vendors (Erffmeyer and Johnson 2001; Hunter and Perreault 2007).

11

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In general, a definition can be classified according to its specificity, as either narrow or broad. Narrow definitions help fine-tune our understanding of a specific application of a phenomenon in a given setting. Such narrow definitions are useful within the limited scope of a research context; however it is difficult to generalize the findings to other situations. Moreover, narrow definitions of IT may suffer from reduced relevance as technologies, systems, and skills become obsolete over time. In contrast, broad definitions have the advantage of being easily generalized beyond a specific research situation. However, broad definitions tend to be overly abstract and can be therefore difficult to apply at narrow situations.

It is recommended in the literature that not a specific SFA system, but the functionality, sales processes and tasks supported by technology should be considered when defining the scope of the SFA definition (Tanner and Shipp 2005). According to Honeycutt and others (2005):

Rapid technological changes and rate of technological obsolescence suggest that future researchers should concentrate on SFA as a process of automating routine and manual sales tasks rather than getting bogged down in the details of what specific technology and equipment constitutes SFA. (p. 321)

Against the background of this discussion, we define SFA as dedicated computer systems designed for salespeople to manage customer, market and product information and perform daily sales activities. The technology pool provided to a given sales force may vary considerably, whereas sales tasks are relatively comparable across different organizations. Our definition focuses on those sales activities supported by SFA, rather than a specific IT

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tool. This approach does not allow us to go deep into the characteristics of a specific SFA system; nonetheless, it helps us establish a certain level of consistency within the literature and generalizability to other contexts.

In the meantime, Customer Relationship Management (CRM) is gaining momentum across industries as a dominant approach in managing customer facing activities. CRM strategies pursued by companies have significant reflections for sales organizations and the information technology geared solely towards the salespeople (i.e., classic SFA solutions). There has been a recent interest in considering SFA as a part of a broader CRM network with additional capabilities and responsibilities for the salesperson. In the next section we briefly present CRM as a strategy and technology, and contrast it with classic SFA deployments. We argue that SFA and CRM are not rival but relevant concepts complementing each other. Our aim is to present an actual view on CRM applications and to enrich our definition of the SFA technology.

2.2.2.

Customer Relationship Management

CRM is defined as “a cross-functional process for achieving a continuous dialogue with customers, across all of their contact and access points, with personalized treatment of the most valuable customers, to increase customer retention and the effectiveness of marketing initiatives” (Day and Van den Bulte 2002, p. 5). In sales force intensive organizations implementation of the CRM strategy relies heavily on salespeople. The sales force is the main means of customer contact and it plays a critical role in realizing a relationship marketing philosophy and maintaining customer relationships (Cannon and Perreault 1999). In addition, salespeople are increasingly asked to take greater roles in other important activities of the firm—such as

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product design, customer service, production, and research and development (Pass et al. 2004).

In such companies, SFA tools are frequently implemented to facilitate the CRM processes (Speier and Venkatesh 2002). In fact, the bulk of CRM functionality is originally designed to enhance sales and sales management (Shoemaker 2001). Early functionality was geared towards solely the improvement of salesperson efficiency (doing same things faster, easier). “Regardless of the nature of any particular SFA system, its primary purpose is to reduce the time spent on support activities and thereby free up the sales force to sell” (Rivers and Dart 1999, p. 60). In such settings, research on CRM has its roots in understanding SFA. Typical foci of the studies thus include the use of e-mail to communicate with customers, contact management software to guide salesperson/customer relationship development, and sales presentation technologies (Ingram et al. 2002). Many papers have been more narrowly focused on SFA, in particular the factors driving acceptance and use of IT by the sales force.

Actually, CRM is rather a business strategy and philosophy, integrating customer focus, relationships with customers and team-based consultative selling into a coherent organizational strategy (Brown 1999; Swift 2001). CRM encompasses different functions such as marketing and service, production and logistics in addition to sales. Whereas much of the extant literature on SFA technology has focused narrowly on personal selling, CRM clearly speaks to the management of organizational processes (Leigh and Marshall 2001). Ingram and others (2002) make a very clear distinction between classic SFA and modern CRM thinking:

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The basic purpose of SFA is to automate selling and administrative tasks so that salespeople and sales managers can perform current activities more efficiently. CRM technology includes this efficiency capability, but also addresses effectiveness issues, such as salespeople doing different things. Thus, sales organizations can use the technology to address the effectiveness and efficiency of their customer relationship processes. (p. 564)

Indeed, “as organizations recognize the enterprise-wide nature of CRM, SFA is being overtaken by broader, relationship-wide (or enterprise-wide) technology.” (Tanner et al. 2005, p. 170) Basic SFA tools are further integrated into enterprise-wide data management systems encompassing sales, marketing, and customer service (Morgan and Inks 2001). The fundamental drive is to reduce transaction costs while providing better service (Donaldson and Wright 2004). Salespeople also favor SFA when the sales processes are integrated with other functions (customer service and marketing) and back-office (e.g., billing, logistics, purchasing) systems (Shoemaker 2001), because such technological advances represent new capabilities for the salesperson which were not possible before. As the strategic focus of IT applications move to optimizing resources by serving the selected customers, a firm progresses beyond the idea of simply reducing transaction costs12 to maximizing revenues (Landry et al. 2005). Leigh and Marshall (2001) explain the changes a company goes through to be more customer-centric in addition to installing SFA technology:

12

In literature computerizing repetitive tasks which were previously used to be done per hand is often suggested to increase the efficiency and reduce costs. For instance, electronic data interchange (EDI) technology is used to transfer data electronically between buyers and suppliers in an attempt to reduce selling costs (MacDonald and

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Organizations that are interested in becoming more customer-oriented are (…) more likely to consider the sales force to be only one of several channels to reach customers. In fact, these firms may employ a full range of sales and channel options to reach different target markets as well as serve strategic customers. They are more likely to stress selling as a core business process, to adopt CRM technology, and to customize their systems to better select, train and reward employees who deliver customer value, profitably. In short, market-driven firms treat customer relationships as the core of their business enterprise. (p. 83)

To sum up, a bigger picture of IT is necessary when conceptualizing sales related technologies in future research. The terms SFA and CRM are merging and used in the literature interchangeably to mean the same, yet increasingly broader concept (Hunter and Perreault 2006). Sales related technology is clearly being developed to include many new uses and integrated to other organizational functions. While involving this CRM thinking in our SFA definition, we stay with the term SFA for the sake of consistency with past research.

2.2.3.

Benefits of Sales Force Automation

SFA technology promises many benefits to sales management and salespeople. By increasing available selling time and enhancing communication and providing faster access to relevant and timely information, SFA can increase the overall quality of the sales effort (Rivers

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and Dart 1999). The expected end-effect is to facilitate a greater understanding of the selling situation, to deliver superior customer value and to forge close mutually beneficial relationships needed to develop market-relating ability for competitive advantage (Dickie 1999). In this section we present potential benefits of SFA technology that encourage companies invest in SFA technology.

Improved Salesperson Efficiency and Productivity

One of the most important reasons companies invest in SFA is to increase the efficiency and productivity of the sales staff (Erffmeyer and Johnson 2001). SFA can minimize the amount of time salespeople spend on routine, repetitive, easily automated tasks such as sending sales call reports, expense reports, and ordering promotional material (Gohmann et al. 2005). Moreover, SFA improves time management and call planning (Weeks and Kahle 1990). Automated routers can interface with planners to identify the downtime in a salesperson’s schedule and direct new leads to the salesperson during such time (Khandpur and Wevers 1998). Eventually, by reducing the amount of downtime in a salesperson's workday and optimizing call schedules, the amount of time devoted to activities more closely associated with selling can be maximized (Ahearne et al. 2005). Furthermore, SFA facilitates and improves information processing and communication, which in return can increase the quantity of work performed in a given time period (Good and Stone 1995). Technology also helps reduce errors and thus saves from time consuming corrective action.

Improved Customer Relationships

Many companies are turning to SFA to help them increase customer acquisition and retention and enhance their customer relationships (Ingram et al. 2002; Wright and Donaldson 2002). SFA increases the depth, the breadth, and the mobility of knowledge through increased communication

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speed and access to customer relevant information (Campbell 2003; Jarvenpaa and Ives 1994; Jayachandran et al. 2005). Sales representatives can in return employ this high quality knowledge to support their customer relationships (Day 1994; Huber 1991; Sinkula 1994).

SFA applications can help salespeople manage customer relationships more effectively across the stages of relationship initiation, maintenance, and termination (Reinartz et al. 2004). Traditionally, salespeople have been best in capturing information about customers and competitors as boundary-spanners of an organization (Pass et al. 2004). At initiation stage, technology assists salespeople in their role as market sensors; salespeople have the important task of sensing the trends and opportunities in the marketplace. Salespeople can search databases, pull data from outside sources, and easily enter new data themselves (Marshall et al. 1999). Search engines enable salespeople to quickly access vast amounts of information at a mouse-click. Through SFA systems, information obtained from various sources such as call-center data, marketing campaigns or other outside suppliers can be rapidly merged and forwarded to the sales force (Shoemaker 2001). Thus, technology can reduce the amount of time spent searching for potential sales prospects (Keillor et al. 1997).

SFA allows salespeople to manage higher quality information about a greater number of customers (Ahearne et al. 2005). At later stages of the customer relationship management process, SFA technology can inform salespeople about the business potential of each prospect to decide which prospects to target (Ahearne et al. 2007). The complete customer information from purchase history to account preferences captured across multiple service encounters is available and accessible for all future transactions, helping salespeople customize their value proposition and offerings to suit the individual needs of their clients (Mithas et al. 2005).

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Salespeople who possess context relevant information have higher chances of successfully closing a sales call (Weitz et al. 1986). SFA systems give sales force quick access to timely information that can be beneficial in closing a sale (Rivers and Dart 1999). For instance, a salesperson can convincingly contrast product benefits with the weaknesses of competitive offerings based on the market and technical knowledge provided by the system (Ahearne et al. 2007). Salespeople also attribute a key role to presentation technology in terms of the level and quality of information they are able to provide during sales calls (Marshall et al. 1999).

Improved Operational Efficiency

SFA technology brings superior internal synergies in serving the customer and offering better value-adding service through its ability to share information between departments within a company (Pullig et al. 2002; Swenson and Parrella 1992). At the organization level, better within organization communication can facilitate seamless purchase transactions with improved order accuracy and cost savings (Shoemaker 2001). Through a well integrated SFA system, order status can be checked in real time for shipment and delivery dates (Mithas et al. 2005). In the end, the sales force benefits from an increased speed of response (e.g. shorter sales cycles) and the management benefits from cost savings (e.g., reduced support costs, reduced inventory requirements, reduced transactional errors) and faster revenue generation (e.g., accelerated cash flow) (Erffmeyer and Johnson 2001).

At the individual level, SFA enhances salesperson's ability to communicate to customers in a precise manner and makes him a reliable business partner (Hunter and Perreault 2007). Enhanced accessibility of the salesperson reduces the time it takes to deal with customer concerns even when the salesperson is away from the customer's site. Strong within organization

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communication can also aid the salesperson in timely identifying and solving the problems that customers face. This gives the salesperson an increased perception of dependability (Keillor et al. 1997). Last but not least, technology can facilitate quick access to information about specific customer needs, product knowledge, industry trends and competing products and thus boost the perceived competency of the salesperson (Hunter and Perreault 2007).

Better Within-Team Collaboration

SFA tools can mediate the information flow and consequently improve the communication within sales teams (Brown and Jones 2005). Improved within-team communication can in return help salespeople become more efficient at synchronizing team activities and setting appointments. On the other hand, technological tools such as collaboration software and networking portals can link a salesperson to other professionals within and across organizational boundaries and simplify the process for sharing tacit information (Shoemaker 2001). The use of tools such as e-mail newsletters and company intranets can keep salespeople informed about company policies, procedures, products, and goals (Hanover 2000).

SFA deployments usually bring significant changes in the way salespeople do their jobs (Speier and Venkatesh 2002). Without the perception of a real advantage, a sales force is less likely to accept the SFA system and whole-heartedly use the technology. Consequently, the benefits of SFA (e.g., the capture and flow of strategic information) will be diminished. To address this type of resistance, management needs to clearly demonstrate the advantage(s) (e.g., more selling time, shorter sales cycle, less paperwork) of using the SFA system over the current system (Morgan and Inks 2001).

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2.3.

Implications of SFA for Sales Management

SFA technology brings new informational and communicational capabilities which were not available in the past. Such capabilities have a potential to change the way salespeople and sales managers do their jobs. In this section we discuss the implications of SFA implementations for sales organizations by reflecting on the general framework proposed by Tanner and his colleagues (2005).

2.3.1.

Strategic Issues

Perhaps one of the greatest consequences of SFA deployments is seen in the way companies make strategic decisions regarding their sales forces. Sales force objectives, structure, and salesperson empowerment have to be rethought in the SFA era. In this part we will be discussing the consequences of SFA technology in strategic issues.

Strategic Account Management

Salespeople generally have the greatest influence in customer retention and reducing customer defection (Johnson et al. 2001). As companies across industries move from a transaction focus to a relationship focus, the sales function is viewed as firms’ means of ‘partnering’ with customers (Ingram 1996; Weitz and Bradford 1999). In this context, SFA is positioned as an enabler for the sales force’s role of developing market relating capability. With the introduction of SFA technology, many simple after-sale service tasks may take less time or no longer be performed at all, leaving the salesperson only more complex tasks (Shoemaker 2001). The integration and alignment of internal and external processes through SFA offer

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salespeople further empowerment and control over company resources when meeting customer needs. Furthermore, SFA technology makes a much greater amount of information transparent to the sales force. This includes aspects of the firm's strategy that in the past often have been withheld from salespeople or only provided on a need-to-know basis. In the end, the role of the salesperson is redefined upwards, where salespeople become more like relationship managers or strategic account managers, with a partnering perspective on the customer (Yim et al. 2004). Clearly, the role of the selling function as informant and decision maker becomes essential (Leigh and Marshall 2001).

Sales Force Structure

The introduction of relationship management philosophy initiated a growing emphasis on selling the way customers want to buy. Consequently, today’s sales organizations are using a variety of methods in their selling strategies. These methods may include the traditional field sales force, team selling, cross-selling by sales divisions and other evolving sales structures such as contact centers, part-time salespeople, sales support personnel, supply-chain personnel, and organizational partners (Tanner et al. 2005). While these methods have different elements and organization structures, they all require a right functioning knowledge management capability. With multiple employees now responsible for customer relations within an account, an information system harmonizing account information is crucial to give all participants access to updated knowledge (Sharma 2002). The introduction of SFA technology has certainly been a catalyst to this shift towards such collaborative approaches, into which the salesperson has to adapt.

Another change stimulated by SFA technology is the multichannel selling. Sales channel alternatives range from relatively inexpensive electronic channels to extremely expensive multi-functional teams, such as a global

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account management program. The specific sales channel mix for each customer group shall be determined by defining the selling activities to be performed for each customer group and choosing the optimal sales channel alternative for each selling activity (Ingram et al. 2002). In such an overall framework, the sales force may just be one of the channels which an account interacts with.

Sales Force Objectives

On the one hand, the customer-centric model emphasizes customer and market responsiveness, consultative selling, integrated customer solutions and cross-functional linkages (Leigh and Marshall 2001). SFA systems can provide salespeople with high amounts of customer, product and competitor information; facilitate relationship selling processes and help salespeople be more ‘customer oriented’ (Moncrief and Marshall 2005). On the other hand, SFA technology, by automating repetitive processes and reducing costs, can also support industries where transaction efficiency and price leadership are crucial. Such firms may further prefer to implement multichannel strategies as a method of reducing costs (Tanner et al. 2005).

Salespeople conventionally sell to customers within target segments. Trying to sell to all of these customers in the same way will not be effective as some customers are simply less profitable and should be dealt with differently or dropped altogether (Dwyer et al. 1987). The type of relationship and the selling model used for each customer segment must balance customer value and cost (Rackham and De Vincentis 1999). Therefore, a key goal must be to allocate available resources more effectively so that customers receive the appropriate attention, at the right cost (Zeithaml et al. 2001). SFA provides a much more complete view of customer segments and supports the salesperson in better prioritizing them. Among the new segmentation techniques made available to the individual

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salesperson through SFA are customer portfolio analysis, sales forecasting, activity-based costing, and customer lifetime value (Buttle 2004; Levin and Zahavi 2001). Early sales process efforts can thus refocus from identifying potential new customers to identifying customers with greatest profitability (Shoemaker 2001). The emphasis is the appropriate relationship, meaning that the objective is not always a deeper relationship and in some cases no relationship at all (Landry et al. 2005). However, serving only a limited set of customers and redesigning how less-profitable accounts will be served may be distressing to some salespeople.

Cultural and Environmental Issues

SFA has implications for organizational culture through increased transparency of salesperson activities. Most SFA systems provide sales management with real-time access to salesperson activity and performance information. The number of sales calls per day, the amount of attention given to each customer, the position of customers in the sales cycle, and the implementation of promotional programs are made instantly available to management. This increased visibility of salesperson activities may lead to a feeling of ‘big brother’-style management, eliminating any gain from the new system (Widmier et al. 2002; Gohmann et al. 2005). To help reduce concerns about management interference in selling activities, SFA should be positioned and used as a tool to help improving the productivity of the sales force, rather than as a monitoring tool for sales management.

2.3.2.

Data Ownership and Management

Data Gathering

Businesses are increasingly realizing that a complete record of customer interactions in a single cross-functional and integrated database (360-degree

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view of customer) is a key for enterprise-wide relationship management success. Such a holistic view of the customer will enable enterprise-level marketing, sales, and channel decisions that drive customer satisfaction through more timely, relevant, and personalized product and service offers,

SALES FORCE AUTOMATION USE AND SALESPERSON PERFORMANCE